If you are looking for overnight accommodation on race weekend, then you may wish to consider the following:

Sepang International Circuit is located near the town of Sepang, about 50km south of the capital Kuala Lumpur. Although out-of-town, the circuit has excellent transport links. Kuala Lumpur International Airport is located only 10 minutes away from the Sepang circuit.
Sepang is the nearest town to the circuit, but most visitors choose to stay in the city of Kuala Lumpur because of the much larger range of accommodation and attractions on offer. Accommodation is very reasonably priced in comparison to many western countries. Similarly, tourist activities, restaurants, and bars all tend to be good value in Malaysia and they're in plentiful supplie in Kuala Lumpur.
Sepang International Circuit is located out-of-town but excellent road and rail links make reaching the circuit relatively easy.
If your interest is just in the Grand Prix then you may want to consider staying at a hotel near the airport, which is located very close to the circuit.

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The interactive map below shows the location of Sepang Circuit. Use the controls to view the circuit as a traditional map or as satellite images, move around, and zoom in and out.